"There are tensions, which are hidden from the public, which have appeared over the last one or two years concerning Israeli weapons sales, particularly to China," Yuval Steinitz told Israeli radio.
His comments followed a report on Israel's private Channel Two television on Wednesday that the Pentagon was demanding the dismissal of Israeli defense ministry director General Amos Yaron.
US officials are furious at Israel for taking back a "sensitive weapons system" from China for upgrading, the channel said, although it did not identify the weapon.
Washington had permitted Israel to take the system back from China for repair, but had not authorized it to be upgraded, according to the report.
Israel's ambassador to Washington, Danny Ayalon, denied on Thursday that the United States had sought the dismissal of Yaron, saying "no demand of that nature was made".
"Questions were raised recently, but they are being examined in a good atmosphere," he said.
Defense minister Shaul Mofaz also denied the accuracy of the report, while accepting that a dossier on Israeli weapons sales to China was "in the process of clarification".
The issue has become very sensitive after Israel in July 2000 canceled a contract to sell to China a Russian Ilyushin-76 plane equipped with its own Phalcon Airborne Warning and Control Systems.
In March 2001 Israel agreed to pay China $350 million to compensate for the canceled sale.
The United States justified its demand with fears that advanced US defense technology contained in Israeli equipment could be used against China's foe Taiwan.
"There has been a tightening of checks exercised by the United States on Israeli weapons exports and since the Phalcon matter we are very sensitive to US requirements," Steinitz said.
"Israel and France are the only countries which compete with the Americans in the advanced military technology sector," the parliamentary committee leader said.
"We must take account of US interests, but a demand for the dismissal of a person in charge such as Amos Yaron... would be unacceptable," he added.
A source close to Prime Minister Ariel Sharon said that "the whole thing had been a misunderstanding".
© 2004 Agence France-Presse
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